OIL & GAS - IBEF · 8 Oil & Gas For updated information, please visit OIL SUPPLY AND DEMAND IN...

For updated information, please visit www.ibef.org October 2018

OIL & GAS

Table of Content

Executive Summary……………….….…….3

Advantage India…………………..….……...4

Market Overview and Trends………..……..6

Notable Trends and Strategies..…..……...23

Growth Drivers…...……………...……….…27

Opportunities...……………………..............34

Useful Information……….......…………..…37

For updated information, please visit www.ibef.org Oil & Gas 3

EXECUTIVE SUMMARY

Second largest refiner

in Asia

As of September 1, 2018, the oil refining capacity of India stood at 247.6 million tonnes, making it the second

largest refiner in Asia. Private companies own about 35.62 per cent of the total refining capacity.

Source: US Energy Information Administration (EIA), Ministry of Petroleum and Natural Gas, BP Statistical Review 2018

India’s energy demand is expected to double to 1,516 Mtoe by 2035 from 753.7 Mtoe in 2017. Moreover, the

country’s share in global primary energy consumption is projected to increase by 2-folds by 2035

India’s consumption of petroleum products grew 5.31 per cent to 204.992 MMT in 2017-18 from 194.597

MMT in FY17. Petroleum products’ consumption during Apr-Sep 2018 stood at 104.38 MMT.

India retained its spot as the third largest consumer of oil in the world in 2017.

LNG imports into the country accounted for about one-fourth of total gas demand, which is estimated to

further increase by two times, over next five years. To meet this rising demand the country plans to increase

its LNG import capacity to 50 million tonnes in the coming years.

India increasingly relies on imported LNG; the country is the fourth largest LNG importer and accounted for

5.68 per cent of global imports.

India imported 18.05 MMT of LNG during 2017-18, in comparison to 18.63 MMT in 2016-17. Imports during

Apr-Aug 2018 stood at 7.13 MMT.

Notes: MMT - Million Metric Tonnes, Mtoe – Million Tonnes of Oil Equivalent; mbpd – Million Barrels Per Day; Figures mentioned in this slide is as per latest data available

World’s third-largest

energy consumer

Third-largest consumer

of oil

Fourth-largest LNG

importer in 2017

Oil and Gas

ADVANTAGE INDIA


ADVANTAGE INDIA

India is the world’s third largest energy

consumer globally

Demand for primary energy in India is

to expected increase threefold by 2035

to 1,516 million tonnes of oil

The oil and gas industry is growing

robustly and players are undertaking

investments to cater to the burgeoning

demand.

The industry is expected to attract US$ 25

billion investments in exploration and

production by 2022.^

Refining capacity in the country is

expected to increase to 667 MTPA by

2040.*

The government allows 100 per cent

Foreign Direct Investment (FDI) in

upstream and private sector refining

projects

The FDI limit for public sector refining

projects has been raised to 49 per cent

without any disinvestment or dilution of

domestic equity in the existing PSUs

Government has enacted various

policies such as the OALP and CBM

policy to encourage investments

In September 2018, Government of

India approved fiscal incentives to

attract investments and technology to

improve recovery from oil fields which

is expected to lead to hydrocarbon

production worth Rs 50 lakh crore

(US$ 745.82 billion) in the next twenty

years.

ADVANTAGE

INDIA

Source: Business Monitor International (BMI), World Oil Outlook 2012, Ministry of Petroleum and Natural Gas, BP Statistical Review 2015

Note: OALP – Open Acreage Licensing Policy, CBM – Coal Bed Methane, MTPA – Million Tonnes Per Annum, Âs per Directorate General of Hydrocarbons, *As per Working Group on

Enhancing Refining Capacity by 2040

Oil and Gas

MARKET OVERVIEW

AND TRENDS


STATE-OWNED COMPANIES DOMINATE OIL AND GAS IN

INDIA

Source: BP Statistical Review 2018, US Energy Information Administration, Petroleum Planning and Analysis Cell, Aranca Research

India remained as the third largest energy consumer in 2017.

India’s oil production reached 35.68 Mt in 2017-18 . As of 2017, the country had 600 million metric tonnes (MMT) of proven oil reserves

India had 1.2 trillion cubic metres of proven gas reserves at the end of 2017 and produced 31.83 bcm of gas in FY18 which is expected to rise and

reach 36 bcm^ by 2021.

State-owned ONGC dominate the upstream segment.

It is the largest upstream company in Exploration and Production (E&P) segment, accounting

for approximately 58.26 per cent of the country’s total oil output (FY18).

IOCL operates a 13,391 km network of crude, gas and product pipelines, with a capacity of

1.896 mbpd of oil and 9.5 mmscmd of gas

This is around 30 per cent of the nation’s total pipeline network

IOCL is the largest company, controls 10 out of 22 Indian refineries, with a combined capacity

of 1.31 mbpd

Reliance launched India’s 1st privately owned refinery in 1999 and has gained considerable

market share (30 per cent)

Nayara Energy Limited’s (NEL’s) Vadinar refinery has a capacity of 20 mmtpa, currently

accounting for around 10 per cent of total refining capacity

Indian Oil and

Gas sector

Upstream segment

- exploration and

production

Midstream

segment – storage

and transportation

Downstream

segment – refining,

processing and

marketing

Notes: bcm – Billion Cubic Metres, mbpd – Million Barrels Per Day, mmscmd - Million Metric Standard Cubic Metre Per Day, mmtpa -- million metric tons per annum, Âs per IEA


OIL SUPPLY AND DEMAND IN INDIA

Source: Ministry of Petroleum and Natural Gas, BP Statistical Review 2018, Aranca Research

Note: CAGR – Compound Annual Growth Rate, mbpd – Million Barrels Per Day, P - Provisional, FY19* - up to August 2018, Âs per OPEC, Based on 50 MMT = 1 MBPD

2.9

4

3.0

8

3.2

4

3.3

2

3.4

9

3.6

9

3.7

3

3.8

5

4.1

6

4.5

6

4.6

9

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

Oil consumption in India (2008-17) (mbpd)

Oil consumption has expanded at a CAGR of 4.78 per cent during 2007–17 to reach 4.69 mbpd by 2017.

Due to the expected strong growth in demand, India’s dependency on oil imports is likely to increase further

Rapid economic growth is leading to greater outputs, which in turn is increasing the demand of oil for production and transportation

India’s crude oil demand is expected to increase over 150 per cent to 10.1 million tonnes per day by 2040.^

In FY18, total crude oil imports were valued at US$ 87.37 billion as compared to US$ 70.71 billion in FY17. In FY18, crude oil imports increased to

4.41 mbpd from 4.27 mbpd in FY17. Crude oil imports during Apr-Aug 2018 stood at 1.90 mbpd.

3.1

8

3.2

7

3.4

3

3.6

9

3.7

8

3.7

9

4.0

5

4.2

7

4.4

1

1.9

0

0.67 0.75 0.76

0.76 0.76 0.75 0.74

0.72 0.64

0.29

0.00

1.00

2.00

3.00

4.00

5.00

6.00

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19*

Oil Imports (mbpd) Oil Production (mbpd)

Imports and domestic oil production in India (mbpd)


GAS SUPPLY AND DEMAND IN INDIA

38

.81

39

.99

48

.34

59

.49

61

.32

56

.66

49

.81

49

.64

46

.41

50

.83

54

.20

1,0

15

.44

1,0

49

.12

1,0

73

.44

1,1

05

.50

1,2

30

.13

1,2

80

.36

1,3

03

.96

1,3

73

.63

1,2

04

.94

1,1

81

.37

1,2

41

.44

0

200

400

600

800

1000

1200

1400

1600

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

Gas Consumption Proven Gas Reserves

Source: PPAC, BP Statistical Review 2018, Aranca Research

Note: F – Forecast, bcm – Billion Cubic Metres, CAGR – Compound Annual Growth Rate Figures are as per latest data available, FY19* - up to July 2018

India’s gas consumption has increased at a CAGR of 3.40 per cent between 2007 and 2017.

Demand is not likely to simmer down anytime soon, given strong economic growth and rising urbanisation.

Gas consumption is projected to reach 143.08 bcm by 2040.

India’s natural gas imports increased at a CAGR of 10.64 per cent during FY10–FY18.

Auto LPG consumption advanced 0.8 per cent during Apr-Jul 2018.

Proven reserves and total gas consumption in the country (bcm)

47

.49

52

.22

46

.48

39

.78

34

.64

32

.79

31

.24

30

.92

31

.80

10.53

11

.72

12

.78

17

.44

17

.19

17

.05

18

.39

21

.21

21

.6

22

.7

9.45

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19*

Gas production Gas Imports

Domestic gas production and imports (bcm)


EXPORTS OF PETROLEUM PRODUCTS FROM INDIA

51

.15

59

.08

60

.84

63

.41

67

.86

63

.93

60

.54

65

.51

66

.76

24

.63

0

10

20

30

40

50

60

70

80

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18P

FY

19*

Exports of Petroleum Products from India (MMT)

Source: PPAC, BP Statistical Review 2018

Note: MMT – Million Metric Tonnes, P – Provisional, FY19* - up to August 2018, HSD – High speed Diesel, MS – Motor Spirit, ATF – Aviation Turbine Fuel, LPG – Liquefied Petroleum Gas,

LDO – Light Diesel Oil, SKO – Superior Kerosene Oil, LOBS – Lubricating Oil Base Stocks, Ôthers includes Hexane, Benzene, MTO (Mineral Turpentine Oil), Sulphur, etc

29

,67

5.6

6

14

,03

5.2

8

8,9

51

.42

7,1

82

.52

2,4

92

.25

35

9.2

9

63

.87

18

.18

17

.24

13

.35

3,9

48

.42

0

5000

10000

15000

20000

25000

30000

HS

D

MS

Nap

tha

AT

F

Fu

el O

il

LP

G

Bitum

en

LD

O

SK

O

LO

BS

Oth

ers

^

Product-wise export of Petroleum Products from India in FY18 (MMT)

India is one of the largest exporters of refinery products due to the presence of various refineries. The country had the fourth largest oil refining

capacity and fourth largest refinery throughput globally in 2017.

Exports of petroleum products from India increased from 51.15 MMT in FY10 to 66.76 MMT in FY18P.

The total value of petroleum products exported from the country stood at US$ 34.89 billion in FY18.

HSD was the major export item among petroleum products, followed by MS, Naptha and ATF.


UPSTREAM SEGMENT: CRUDE OIL AND GAS

PRODUCTION (1/2)

22

.50

21

.80

20

.50

19

.20

20

.80

21

.10

20

.90

20

.80

8.3

0

3.60 3.80 3.70

3.50 3.40 3.20 3.30 3.40

1.40

9.5

0

10

.30

11

.50

12

.00

11

.70

11

.20

10

.40

9.9

0

4.1

0

0

5

10

15

20

25

30

35

40

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19*

ONGC OIL Pvt/JV

Source: Ministry of Petroleum and Natural Gas, Aranca Research

Notes: MMT – Million Metric Tonne, JV – Joint Venture, P – Provisional, FY19* - up to August 2018

Crude Oil Production (in MMT)

16

.43

18

.03

19

.44

19

.59

18

.54

17

.85

17

.59

17

.54

21

.28

20

.06

18

.42

18

.20

18

.92

19

.09

18

.42

18

.14

-

5

10

15

20

25

30

35

40

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

Onshore Offshore

Annual crude oil production (in MMT)

In 2017-18, crude oil production stood at 35.68 million tonnes. Crude oil production without inclusion of condensates reached nearly 34 million

tonnes.

ONGC accounted for around 58.26 per cent of total crude oil production in India.


UPSTREAM SEGMENT: CRUDE OIL AND GAS

PRODUCTION (2/2)

23

,09

5

23

,31

6

23

,54

9

23

,28

4

22

,02

3

21

,17

7

22

,08

8

23

,42

9

10

,01

3

26,0

54

21,6

09

14,4

91

9,4

97

8,9

12

8,2

35

6,8

72

6,3

38

2,421

2,350

2,633

2,639

2,626 2,722

2,838 2,937 2,881

1,137

-

10,000

20,000

30,000

40,000

50,000

60,000


ONGC Pvt/JV OIL

Source: Ministry of Petroleum and Natural Gas; Aranca Research

Note: JV – Joint Venture, Încluding CBM production

Annual gas production (million metric standard cubic meter)

8,5

77

.00

9,0

83

.80

8,8

76

.92

9,0

11

.68

8,7

95

.63

9,2

37

.48

9,8

58

.48

10

,63

8.6

8

4,4

70

.92

43

,64

5.1

0

38

,47

4.8

4

31

,80

2.3

5

26

,39

5.2

0

24

,86

0.6

4

23

,01

1.7

4

22

,03

8.2

3

22

,01

0.6

2

9,1

00

.76

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000


Onshore^ Offshore

Annual gas production (million metric standard cubic meter)


UPSTREAM SEGMENT: EXPLORATION AND

DEVELOPMENT ACTIVITIES

40

102

119

227

0

50

100

150

200

250

300

350

Offshore Onshore

Wells Meterage ('000 metres)

Source: Ministry of Petroleum and Natural Gas, Aranca Research, BMI

Notes: FY17(1) – Provisional, *OALP – Open Acreage Licensing Policy, Updated data is expected to be released in PNG Statistics 2017-18

Exploration activities (FY17(1))

86

312 222

628

0

100

200

300

400

500

600

700

800

900

1000

Offshore Onshore

Wells Meterage ('000 metres)

Development drilling activities (FY17(1))

During FY17(1), 1,245,000 metres of wells were explored and developed and 540 wells were drilled in the country.

State-owned oil companies undertake most of the upstream drilling and exploration work.

In September 2018, investments worth Rs 5,900 crore (US$ 840.70 million) were committed in 55 oil and gas exploration areas awarded under

Open Acreage Licensing Policy – 1. The Government of India will soon undertake auction of 14 more blocks in the second round.


PIPELINES: CRUDE PIPELINE NETWORK

40.77%

33.87%

5.85%

19.51%

ONGC

IOC

OIL

Others*

51.33%

11.55%

11.54%

25.58%

IOCL

OIL

ONGC

Others*


Note: km – Kilometre, mmtpa – Million Metric Tonnes Per Annum, (1)Approximate, *Others includes HMEL, BPCL and Cairn

Shares in crude pipeline network by length

(out of 10,328 km, Sep 1, 2018)1

Shares in crude pipeline network by capacity

(out of 143.5 MMTPA, Sep 1, 2018)1

As of Sep 1, 2018, India had a network of 10,328 km of crude pipeline having a capacity of 143.5 mmtpa(1).

In terms of length, IOCL accounts for 51.33 per cent (5,301 km) of India’s crude pipeline network.

In terms of actual capacities, ONGC leads the pack with a share of 40.77 per cent, followed by IOCL at 33.87 per cent.


PIPELINES: EXISTING PIPELINES IN INDIA

IOCL BPCL(1) HPCL(2) OIL ONGC Cairn HMEL Others (GAIL and Petronet India.) Total industry

Length (Kms)

Product

Pipeline 7,909 1,948 3,371 654 - - - 2,688 16,570

Crude oil

Pipeline 5,301 937 - 1,193 1,192 688 1,017 - 10,328

Total 13,251 2,885 3,371 1,847 1,192 688 1,017 2,688 26,898

Capacity of Crude Oil Pipelines (MMTPA)

Product

Pipeline 45.4 16.2 38.1 1.7 - - - 9.3 110.6

Crude oil

Pipeline 48.6 6.0 - 8.4 58.5 10.7 11.3 - 143.5

Total 94.0 22.2 38.1 10.1 58.5 10.7 11.3 9.3 254.1


Note: kms – Kilometres, mmtpa – Million Metric Tonnes Per Annum, (1)Includes Petronet Cochin-Coimbatore-Karur Product pipeline, (2)Includes Petronet Mangalore-Hassan-Bangalore

Product Pipeline

Company-wise length and capacity of products pipeline and crude oil pipeline (as of Sep 1, 2018)


PIPELINES: REFINED PRODUCTS AND LPG PIPELINE

NETWORK

68.03%

10.64%

15.62%

4.87%

0.83%

GAIL

Reliance

GSPL

ARN

IOCL

47.73%

20.34%

11.76%

3.95%

16.22%

IOC

HPCL

BPCL

OIL

Others


Shares in products pipeline network under operation by length

(out of 16,570 km, FY192)

Shares in Natural Gas pipeline network by length

(out of 16,771 km, FY192)

With 16,570 km of refined products pipeline network (capacity of 110.6 mmtpa) in India, Indian Oil Corporation (IOC) leads the segment with 47.73

per cent of the total length of product pipeline network, as of September 1, 2018.

Top three companies IOC, HPCL and BPCL contribute 79.83 per cent of the total length of product pipeline network in the country.

As of September 1, 2018, Gas Authority of India Ltd. (GAIL) has largest share (68.03 per cent or 11,410 km) of the country’s natural gas pipeline

network (16,771 km)

Note: km - Kilometre, mmtpa – Million Metric Tonnes Per Annum, LPG - Liquefied Petroleum Gas, IOC - Indian Oil Corporation, HPCL - Hindustan Petroleum Corporation Ltd, BPCL -

Bharat Petroleum Corporation Ltd, OIL - Oil India Limited, (1)Others include GAIL and Petronet India, (2)As of September 1, 2018


DOWNSTREAM SEGMENT: REFINERY CRUDE

THROUGHPUT… (1/2)

10

8.0

3

11

2.5

1

11

2.1

7

11

2.1

3

11

5.1

1

12

2.5

8

13

0.5

7

13

4.2

2

13

4.7

3

14

4.2

0

15

4.3

16

0.7

7

70

.20

33

.43

38

.29

48

.54

74

.44

81

.38

81

.18

88

.27

88

.23

88

.53

88

.66

91

.09

91

.16

37

.61

0

50

100

150

200

250

300

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19*

Public sector Private sector


Note: MMT – Million Metric Tonne, Public Sector includes IOCL ,BPCL ,HPCL, CPCL and ONGC, Private sector includes RIL and NEL, FY19* - up to August 2018

India has 23 refineries, out of which 18 are in the public sector, two

in the joint sector and three in the private sector.

Crude oil throughput of public sector refineries has grown at a CAGR

of 3.68 per cent from 108.03 MMT in FY07 to 160.77 MMT in FY18.

During the same time, crude oil throughput of private sector

refineries has grown at a CAGR of 9.55 per cent from 33.43 MMT to

91.16 MMT.

The share of private sector refineries’ throughput in total crude

throughput has grown from 29.99 per cent in FY07 to 36.18 per cent

in FY18.

Refiner crude throughput of public sector and private sector stood at

70.20 MMT and 37.61 MMT, respectively, during Apr-Aug 2018.

Visakhapatnam port traffic (million tonnes) Refinery crude throughput (MMT)


DOWNSTREAM SEGMENT: REFINERY CRUDE

THROUGHPUT… (2/2)

Shares in India's total refining capacity (Sep 1, 2018)

11

6.8

9

12

0.0

7

12

0.0

7

12

0.0

7

12

0.0

7

13

5.0

7

13

9.0

0

14

2.1

0

14

2.1

0

76

.50

93

.00

95

.00

95

.00

95

.00

95

.00

95

.00

10

5.5

0

10

5.5

0

0.00

50.00

100.00

150.00

200.00

250.00

300.00


Public sector Private sector (incl JV)

Source: Ministry of Petroleum and Natural Gas, PPAC, Aranca Research

Total installed refinery capacity (MMT)

Note: MMT – Million Metric Tonne; HPCL - Hindustan Petroleum Corporation Ltd, BPCL - Bharat Petroleum Corporation Ltd, OIL - Oil India Limited, ONGC - Oil and Natural Gas

Corporation, IOCL - Indian Oil Corporation Ltd, CPCL - Chennai Petroleum Corporation Limited, FY 19* - As of Sep 1, 2018

As of Sep 1, 2018, the sector’s total installed provisional refinery capacity was 247.6 MMT. IOC emerged as the largest domestic refiner with a

capacity of 69.2 MMT

Top three companies - RIL, IOC and BPCL contribute around 70.23 per cent of India's total refining capacity

27.95%

27.54%

14.74%

10.95%

8.08%

6.10% 4.64% IOC

RIL

BPCL

HPCL

Essar

ONGC

CPCL

247.6 MMT


DOWNSTREAM SEGMENT: PETROLEUM PRODUCTS

Consumption of petroleum products in India increased to 204.92

MMT in FY18(P) from 194.60 MMT in FY17.

Petroleum products derived from crude oil include light distillates

such as LPG, naphtha; middle distillates such as kerosene; and

heavy ends such as furnace, lube oils, bitumen, petroleum coke and

paraffin wax

Light distillates with the highest growth rate grew at CAGR of 4.78

per cent, while middle distillates and heavy end segment witnessed a

CAGR of 3.93 per cent and 5.89 per cent respectively, during the

year FY08-17.

Production of petroleum products increased from 3,996 tmt in FY 07

to 4,608 tmt in FY 18.

Production of petroleum products by fractionators grew to 2,012.36

tmt during Apr-Aug 2018.

Consumption of Petroleum Products (MMT)

38.4 39.7 39.0 41.4 43.9 46.3 47.6 50.9 54.7 58.5

62.8 66.4 71.1 75.0 79.4 82.7 81.8 82.8 81.9 88.9

27.7 27.5 27.7 24.6 24.9 28.1 29.0 31.4 31.6 46.4

0.0

50.0

100.0

150.0

200.0

250.0

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Light Distillates Middle Distillates Heavy Ends


3,9

96

.00

4,0

84

.00

4,1

91

.40

4,3

63

.00

4,1

68

.60

4,1

75

.20

4,0

89

.43

3,8

71

.57

3,6

57

.15

3,3

77

.16

3,4

57

.75

4,6

08

.00

2,0

12

.36

0.00

1000.00

2000.00

3000.00

4000.00

5000.00

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19*

Production of Petroleum Products by Fractionators (tmt)

Note: MMT – Million Metric Tonne, tmt – thousand metric tonne, FY19* - As of August 2018, Updated data on consumption is expected to be released in PNG Statistics 2017-18


DOWNSTREAM SEGMENT: DISTRIBUTION AND

MARKETING

85.10 89.57 97.70 104.50 110.50

109.72 97.36 97.36

96.61 107.58

0.0

50.0

100.0

150.0

200.0

250.0

FY14 FY15 FY16 FY17 FY18

Product pipeline Natural Gas Pipeline


Downstream distribution statistics (MMT)

Pipeline Capacity (mmtpa)

As of Sep 1, 2018

Length (km)

As of Sep 1, 2018

Crude Pipeline 143.5 10,328

Product Pipeline 110.6 16,570

Natural Gas Pipeline 104.08 16,771

Note: MMT – Million Metric Tonne, mmtpa – Million Metric Tonnes Per Annum, OMC – Oil Marketing Companies, (P) - Provisional

The total number of OMC retail outlets increased to 63,275 at the

start of September 2018 (P) from 59,595 at the end of FY17.

IOC, as of Sep 1, 2018, owned the maximum number of retail outlets

in the country (27,281 or 43.11 per cent of total), followed by HPCL

(15,191 or 24.06 per cent), BPCL (14,527 or 22.96 per cent) and

MRPL (6 or 0.01 per cent); the remaining being owned by private

firms.

As of Sep 1, 2018, there were 21,206 LPG distributors (of PSUs) in

India.


STATE-WISE CRUDE RESERVE, CAPACITY AND

THROUGHPUT


State Balance recoverable reserves

of crude oil, April 1, 2017 (MMT)

Assam 159.96

Gujarat 118.61

Rajasthan 24.55

Tamil Nadu 9.00

Andhra Pradesh 8.15

Nagaland 2.38

Arunachal Pradesh 1.52

Tripura 0.07

Total Onshore 324.24

Western Offshore 239.20

Eastern Offshore 40.67

Total Offshore 279.87

State Installed capacity,

as of April 2017 (mt)

Crude throughput for

FY 2017 (MMT)

Gujarat 93.7 105.01

Maharashtra 19.5 22.05

Haryana 15.0 15.64

Karnataka 15.0 15.97

Tamil Nadu 1.5 0.53

Kerala 12.4 11.82

Andhra Pradesh 8.396 9.42

Uttar Pradesh 8.0 9.23

West Bengal 7.5 7.69

Assam 7.0 6.57

Bihar 6.0 6.53

Punjab 9.0 10.52

Madhya Pradesh 6.0 6.36

Odisha 15 8.23

Himachal Pradesh 10.5 9.76

Total 234.496 245.33

Note: Mmt – Million Metric Tonne, mt – Million Tonne, Update is expected to be available in Petroleum and Natural Gas Statistics 2017-18 from Ministry of Petroleum and Natural Gas


KEY DOMESTIC OIL AND GAS COMPANIES

Source: Bloomberg, Aranca Research

Company Ownership

(per cent) as of FY18

Total Income from

Operations in FY18

(US$ billion)

Indian Oil Corporation Limited 56.98%

state-owned 65.79

Reliance Industries Public Listed 60.77

Bharat Petroleum Corporation

Limited

54.31%

state-owned 31.13*

Hindustan Petroleum

Corporation Limited

51.11%

state-owned (through

ONGC)

34.06

ONGC 68.07%

state-owned 11.99*

GAIL India Limited 53.59%

state-owned 8.46

Oil India Limited 66.13%

state-owned 1.69*

Note: : FY – Indian Financial Year from April–March , *for FY17

Oil and Gas

NOTABLE TRENDS

AND STRATEGIES


NOTABLE TRENDS IN THE OIL AND GAS SECTOR

Government approved the CBM policy in 1997 to boost the development of clean and renewable energy

resources

The CBM policy was designed to be liberal and investor friendly; the 1st commercial production of CBM was

initiated in July 2007 at about 72,000 cubic metres per day. Production in 2017-18 stood at 2.01 million cubic

metres per day.

Coal Bed Methane

(CBM)

The technology was first widely used in the US in the 1800s and in India (Kolkata and Mumbai) in the early

1900s

UCG is currently the only feasible technology available to harness energy from deep unmineable coal seams

economically in an eco-friendly manner and it reduces capital outlay, operating costs and output gas

expenses by 25–50 per cent vis-à-vis surface gasification

Underground Coal

Gasification (UCG)

The government initiated the National Gas Hydrate Programme (NGHP), a consortium of national E and P

companies and research institutions, to map gas hydrates for use as an alternate source of energy

Bio-fuels (bio-ethanol and bio-diesel) are alternate sources of energy from domestic renewable resources;

these have lower emissions compared to petroleum or diesel

Gas hydrates and bio-

fuels

The Open Acreage Licensing Policy (OALP), which allows an explorer to study the data available and bid for

blocks of his choice has been initiated to increase foreign participation by global E & P companies like Shell,

BP, Conoco Phillips etc

Open Acreage

Licensing Policy


STRATEGIES ADOPTED … (1/2)

Expansions

Source: Aranca Research

Diversification

Open Acreage Licensing Policy

In September 2018, the Government of Gujarat selected Energy Infrastructure Limited (EIL), a subsidiary of the

Netherlands-based Energy Infrastructure Butano (Asia) BV, to set up a Liquefied Petroleum Gas (LPG) terminal at Okha

with an investment of Rs 700 crore (US$ 104.42 million).

Oil and Natural Gas Corporation (ONGC) is going to invest Rs 17,615 crore (US$ 2.73 billion) on drilling oil and gas wells

in 2018-19.

H-Energy is planning to invest Rs 3,500 crore (US$ 540.62 million) to build Liquified Natural Gas (LNG) terminals and lay

down a 60 km pipeline.

State run energy firms Bharat Petroleum, Hindustan Petroleum and Indian Oil Corp plan to spend US$ 20 billion on refinery

expansions to add units, by 2022

The country’s state owned oil companies aim to sustain spending at a 3 year high due to increasing demand and declining

oil services costs. Indian Oil plans to expand its refining capacity and build new businesses, for which it will be spending

US$ 27.94 billion over the next 5-7 years.

Indian Oil Corp plans to make an investment of US$22.91 billion, including US$ 7.64 billion for expanding its existing

brownfield refineries, in the next 5 to 7 years. Moreover, the company plans to lay the nation's longest LPG pipeline of

1987 km, from Gujarat coast to Gorakhpur in eastern Uttar Pradesh, to cater to growing demand for cooking gas in the

country.

India targets US$ 100 billion worth investments in gas infrastructure by 2022, including an addition of another 228 cities to

city gas distribution (CGD) network. This would include setting up of RLNG terminals, pipeline projects, completion of the

gas grid and setting up of CGD network in more cities.

Oil companies are focusing on vertical integration for next stage of growth. For instance, oil producer Oil India Ltd is

planning to build and operate refineries, while Indian Oil is planning to enter oil and gas exploration

As of March 2017, Bharat Petroleum Corp. Ltd. (BPCL), an Indian state-controlled oil and gas company, plans to enter the

country’s travel business with the launch of its startup named as “Happy Roads”. The application, which is available on

Android Play Store, documents itineraries and assists the users in planning a fun-filled trip


STRATEGIES ADOPTED … (2/2)

Source: India Banking Association, Reserve Bank of India, Aranca Research

Notes: ATM - Automated Teller Machine, FIP – Financial Inclusion Plan, RBI – Reserve Bank of India

Move to non-

conventional energy

resources

Companies are looking forward to developing JVs and technical partnership with foreign companies to improve capabilities

to develop shale reserves

Investments to enhance

production

Indian companies are enhancing production through redevelopment plans to increase recovery rates of hydrocarbon from

oil wells; ONGC in Mumbai High achieved success in implementing this.

Indian Oil Company (IOC) is planning to invest Rs 1.43 lakh crore (US$ 22.19 billion) to nearly double its oil refining

capacity to 150 million tonnes by 2030.

More focus upon small

companies

Private sector units like Adani, Sun Petrochemicals and few new entrants have bagged 1/3rd of small oil and gas fields.

In February 2017, Genesis, London, bagged a contract from RIL’s (Reliance Industries) to design deep water field front

end engineering at KG Basin in West India.

Pilot project Initiated for

Shale Gas Production in

India

Oil and Natural Gas Corp (ONGC) has started Shale Gas exploration by spudding the first Shale Gas well RNSG-1 in

Burdwan District of West Bengal.

Piped Cooking Gas

ONGC has started supply of Piped Natural Gas in Bhubaneswar from October 2017 and is currently laying down natural

gas pipeline in Varanasi.

In May 2018, India launched its biggest auction of City Gas Distribution (CGD) networks. The successful companies will be

permitted to sell Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) in 86 geographical areas. The auctions

are expected to lead to investments worth Rs 70,000 crore (US$ 10.86 billion).

Oil and Gas

GROWTH DRIVERS


GROWTH DRIVERS

Source: Ministry of Petroleum and Natural Gas, US Energy Information Administration, BP Statistical Review of World 2015 Energy, June 2012; BMI, Aranca Research

Notes: TCM - Trillion Cubic Metres, EandP - Exploration and Production

Growing Demand

Robust growth in domestic

market

Increasing demand for natural

gas

Favourable Business Conditions

Abundant raw material

Skilled labour

Government Support

100% FDI investments

allowed

Favourable Policies


RISING DEMAND

Energy demand of India is anticipated to grow faster than energy demand of all major economies, on the back of continuous robust economic

growth.

Consequently, India’s energy demand as a percentage of global energy demand is expected to rise to 11 per cent in 2040 from 5.58 per cent in

2017.

Crude oil consumption is expected to grow at a CAGR of 3.60 per cent to 500 million tonnes by 2040 from 221.76 million tonnes in 2017.

Natural Gas consumption is forecasted to increase at a CAGR of 4.31 per cent to 143.08 million tonnes by 2040 from 54.20 million tonnes in 2017.

Crude oil consumption and forecast (MT)

22

1.7

6

50

0.0

0

0

100

200

300

400

500

600

2017 2040F

Natural gas consumption and forecast (BCM)

54

.20

14

3.0

8

0

20

40

60

80

100

120

140

160

2017 2040F

Source: BP Statistical Review of World Energy 2018, BP Energy Outlook 2018

Notes: F-Forecast, MT – Million Tonnes, BCM – Billion Cubic Metres

CAGR 3.60% CAGR 4.31%


REGULATORY OVERVIEW OF THE INDUSTRY… (1/2)

Pricing of CNG and PNG

by CGD Entities (2014)


In 2014, the pricing for CNG (transport) and PNG (domestic) were examined by the Ministry of Petroleum and Natural Gas

while the disclosure of prices of the CNG and PNG commodities were made compulsory

The Policy on Shale Gas

and Oil, 2013 Allows companies to apply for shale gas and oil rights in their petroleum exploration licenses and petroleum mining leases

Open Acreage Licensing

Launched in June 2017, it allows companies to carve out area for petroleum exploration and production. The policy,

launched under Hydrocarbon Exploration and Licensing Policy (HELP), has replaced New Exploration and Licensing Policy

under which bidders did not have the freedom of carving out areas for E&P

National Policy on

Biofuels, 2018

Proposes an indicative target of 20 per cent blending of ethanol in petrol and 5 per cent blending of biodiesel in diesel by

2030

Promotes advanced biofuels through a viability gap funding scheme of Rs 5,000 crore (US$ 745.82 million) in six years for

2G ethanol Bio refineries, along with additional tax incentives.

Integrated Energy Policy

(IEP), 2006 Outlines goals to deal with challenges faced by India’s energy sector


REGULATORY OVERVIEW OF THE INDUSTRY… (2/2)


Petroleum and Natural

Gas Regulatory Board

(PNGRB) Act, 2006

Regulate refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products

and natural gas

Auto Fuel Policy, 2003 Provide a roadmap to comply with various vehicular emission norms and corresponding fuel quality upgrading

requirements over a period of time

Freight Subsidy (for far-

flung areas) Scheme,

2002

Compensate public sector Oil Marketing Companies (OMCs) for the freight incurred to distribute subsidised products in far-

flung areas

Domestic Natural Gas

Pricing Formula, 2014 New domestic natural gas pricing formula has been formed, which will be revised on an half yearly basis.

Marginal Field Policy

Monetise discovered small oil and gas fields to augment domestic production

Improved fiscal terms viz. no oil cess applicable on crude oil production, no upfront signature bonus, pricing and marketing

freedom for oil and gas and no carried interest by NOCs

Note: NOCs - National Oil Companies


FDI INVESTMENTS IN PETROLEUM AND GAS IN INDIA

Source: Department of Industrial Policy and Promotion, Aranca Research

FDI inflows in India’s petroleum and natural gas sector stood at US$ 7,002.27 million during April 2000–June 2018.

7.00

0.10

2.10 0.10

1.10 0.07 0.18 0.03

3.20

7.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

FY01-FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19* FY01-FY19*

FDI Inflows in Petroleum and Natural Gas in April 2000-June 2018 (US$ billion)

Note: FY19* - up to June 2018


M&A ACTIVITIES IN THE INDIAN OIL AND GAS

SECTOR

Source: Thomson Banker, News Articles

Date announced Acquirer name Target name Value of deal (US$ million)

Apr 2018 Indian Oil Corporation Ltd (IOCL) Shell Exploration & Production, Oman 329

Feb 2018 ONGC HPCL (51.11 per cent stake) 57,020.39

Feb 2018 ONGC Videsh Abu Dhabi National Oil Co (10 per cent stake

in offshore oilfield) 600

Aug 2017 Rosneft Essar Oil (49 per cent stake) 1,290

Dec 2016 Oil and Natural Gas Corp's Gujarat State Petroleum Co's 1,200

Dec 2015 ONGC Videsh Ltd (OVL) Vankor oil field 1,260

Jan 2015 Bharat Forge Mecanique Generale Langroise 12.82

Jun 2014 Gulf Petrochem Ltd Sah Petroleums Limited 7.13

Mar 2014 IOCL Progress Energy Canada Ltd Not disclosed

Oct 2013 ONGC Videsh Ltd Parque das Conchas, Brazilian Oilfield 529

Jun 2013 ONGC Videsh Ltd (in partnership

with Oil India Ltd) Rovuma Area 1 Offshore Block 2,640

Oil and Gas

OPPORTUNITIES


OPPORTUNITIES

Locating new fields for exploration: 78 per cent of the country’s sedimentary area is yet to be explored

Development of unconventional resources: CBM fields in the deep sea

Opportunities for secondary/tertiary oil producing techniques

Higher demand for skilled labour and oilfield services and equipment

Expansion in the transmission network of gas pipelines

LNG imports have increased significantly; this provides an opportunity to boost production capacity

In light of mounting LNG production, huge opportunity lies for LNG terminal operation, engineering,

procurement and construction services

Midstream segment

India is already a refining hub with 21 refineries and expansions planned for tapping foreign investment in

export-oriented infrastructure, including product pipelines and export terminals

Development of City Gas Distribution (CGD) networks, which are similar to Delhi and Mumbai’s CGDs

Expansion of the country’s petroleum product distribution network

Downstream segment

Upstream segment


SHALE GAS PROSPECTS OF INDIA

Source: EandY; Ministry of Petroleum and Natural Gas, Aranca Research

India has technically recoverable shale gas resources of nearly 96 tcf.

The Cambay, Krishna Godavari, Cauvery and the Damodar Valley are the most prospective sedimentary basins for carrying out shale gas

activities in the country

Around 20 tcf of gas has been classified as technically recoverable reserves in the Cambay basin in Gujarat (the largest basin in the country)

spread across 20,000 gross square miles with a prospective area of 1,940 square miles

It is estimated that the Krishna Godavari (KG) basin encloses a series of organically rich shales, containing around 27 tcf of technically

recoverable gas. KG basin, located in Eastern India, holds the country’s largest shale gas reserves, extending over 7,800 gross square miles with

a prospective area of around 4,340 square miles

In April 2013, the Directorate General of Hydrocarbons (DGH) submitted its policy on exploitation of shale gas to the Ministry of Petroleum and

Natural Gas

India launched its policy on shale gas exploration to tap the non-conventional energy resource in order to boost output.

Notes: tcf – Trillion Cubic Feet

Oil and Gas

USEFUL

INFORMATION


CONTACT INFORMATION

Name Address Contact person Telephone E-mail

Oil Industry

Development Board

(OIDB)

3rd Floor, Tower C, Plot No. 2, Sector

– 73, Noida, Uttar Pradesh - 201301

Mr Ajay Srivastava, Financial

Adviser and Chief Accounts

Officer

0120-2594630

0120-2594603 [email protected]

Petroleum Conservation

Research Association

(PCRA)

Sanrakshan Bhavan, 10 Bhikaji Cama

Place, New Delhi – 110066 Mr Alok Tripathi, ED

91-11- 26198799

Ext.301 [email protected]

Bureau of Energy

Efficiency (BEE)

Ministry of Power, 4th floor, SEWA

Bhawan, RK Puram,

New Delhi – 110066

Mr Abhay Bakre, Director

General

91-11- 26178316,

91-11- 26179699 [email protected],

Oil Industry Safety

Directorate

Ministry of Petroleum & Natural Gas,

8th Floor, OIDB Bhawan, Plot No 2,

Sector-73, Noida, Uttar Pradesh-

201301

Mr Varanasi Janardhana Rao,

ED 0120-2593800 [email protected]

Petroleum Planning and

Analysis Cell (PPAC)

Ministry of Petroleum and Natural

Gas, 2nd floor, Core-8, SCOPE

Complex, 7 Institutional Area, Lodhi

Road, New Delhi – 110003

Mr Vinod Kumar, Deputy

Director – Information

Technology

011-24306153 [email protected]

Directorate General of

Hydrocarbons

Ministry of Petroleum and Natural

Gas, OIDB Bhawan, Plot No 2, Sector

73, Noida

Mr Atanu Chakraborty,

Director General 0120 - 2472001 [email protected]


GLOSSARY

B/D (or bpd): Barrels Per Day

MBPD (or mbpd): Million Barrels Per Day

BCM (or bcm): Billion Cubic Metres

CBM: Coal Bed Methane

CGD: City Gas Distribution

EandP: Exploration and Production

FDI: Foreign Direct Investment

FY: Indian Financial Year (April to March)

• FY17 implies April 2016 to March 2017

GoI: Government of India

INR: Indian Rupee

LNG: Liquefied Natural Gas

MMT (or MMT): Million Metric Tonne

MMTPA (or mmtpa): Million Metric Tonnes Per Annum

EBITDA: Earning Before Interest Taxes Depreciation Amortisation

NRL: Numaligarh Refinery Limited

CPCL: Chennai Petroleum Corporation Limited

HPCL: Hindustan Petroleum Corporation Limited

BPCL: Bharat Petroleum Corporation Limited


GLOSSARY

IOC: Indian Oil Corporation Ltd

EOL: Essar Oil Ltd

RPL: Reliance Petroleum Limited

MRPL: Mangalore Refinery and Petrochemicals Limited

PCCK: Petronet Cochin-Coimbatore-Karur

PMHB: Petronet Mangalore-Hassan-Bangalore

OALP: Open Acreage Licensing Policy

TOE (or toe): Tonnes of Oil Equivalent

US$ : US Dollar

ONGC: Oil and Natural Gas Corporation of India

IOCL: Indian Oil Corporation Limited

mn bbl: Million Barrels

CAGR: Compound Annual Growth Rate

JV: Joint Venture

UCG: Underground Coal Gasification

NGL: Natural Gas Liquids

OMCs: Oil Marketing Companies

NHGP: National Gas Hydrate Programme

Wherever applicable, numbers have been rounded off to the nearest whole number


EXCHANGE RATES

Exchange Rates (Fiscal Year) Exchange Rates (Calendar Year)

Year INR INR Equivalent of one US$

2004–05 44.95

2005–06 44.28

2006–07 45.29

2007–08 40.24

2008–09 45.91

2009–10 47.42

2010–11 45.58

2011–12 47.95

2012–13 54.45

2013–14 60.50

2014-15 61.15

2015-16 65.46

2016-17 67.09

2017-18 64.45

Q1 2018-19 67.04

Q2 2018-19 70.18

Year INR Equivalent of one US$

2005 44.11

2006 45.33

2007 41.29

2008 43.42

2009 48.35

2010 45.74

2011 46.67

2012 53.49

2013 58.63

2014 61.03

2015 64.15

2016 67.21

2017 65.12

Source: Reserve Bank of India, Average for the year


DISCLAIMER

India Brand Equity Foundation (IBEF) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation

with IBEF.

All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced,

wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or

incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval

of IBEF.

This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the

information is accurate to the best of Aranca and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a

substitute for professional advice.

Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do

they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation.

Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any

reliance placed or guidance taken from any portion of this presentation.

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